Trusts of Land and Appointment of Trustees Act

‘At its simplest the principle in Stack v Dowden is that a “common intention” trust, for the cohabitants’ home to belong to them jointly in equity as well as on the proprietorship register, is the default option in joint names cases. The trust can be classified as a constructive trust, but it is not at odds with the parties’ legal ownership. Beneficial ownership mirrors legal ownership. What it is at odds with is the presumption of a resulting trust.

’ Following the decision in Stack v Dowden[1], the law concerning co-ownership and the parties’ presumptive corresponding shares of the property in both sole and joint ownership cases has undergone a substantial transfiguration, with the substructure of the presumption of beneficial interest diverting from, and overruling, the previous decisions of Pettit v Pettit[2] and Gissing v Gissing[3].

The new presumptive standpoint would indeed appear to simplify the law surrounding disputes of beneficial interest, but to attempt to conceptualise the ‘simplicity’ of the subsequent principles is to greatly disparage the complexities, nuances and issues which also emanate from the resultant legal position. The determination of beneficial interest in a property is primarily ascertained through express or implied trusts. Where there is an express declaration of trust, the shares contained therein are conclusive[4] unless varied by subsequent agreements or affected by proprietary estoppel.

Any such declaration must be manifested in writing[5], and where the title is to be held jointly the trust should be executed on the necessary TR1 or FR1 land registration forms, stating whether they are to be joint tenants or tenants in common[6]. A joint tenancy manifests that the co-owners hold the property concurrently[7] and upon death of a co-owner, their interest does not pass under the usual laws of succession, but instead, passes to the surviving joint tenant under the doctrine of jus accrescendi (right of survivorship).

A tenancy in common on the other hand, evinces that the property is owned in undivided shares, with each owner having a specified share in the land. In the absence of an express declaration, the courts may infer beneficial interest through the equitable doctrines of constructive and resulting trusts. These operate to modify the formalities contained within s. 53 (1) (b) and (c)[8] and are, like express trusts, governed by the Trusts of Land and Appointment of Trustees Act[9].

The flexibility of inference derives from the fact that there is no need for such trusts to be manifested in writing[10]. Resulting trusts are implied where the land is purchased under sole ownership, but using funds belonging to another party toward the actual purchase price which were not intended as a gift or loan. Their equitable shares will be tantamount to their financial contribution and ‘crystallises on the date that the property is acquired’[11]. A constructive trust is inferred where there is a common intention and the party, in reliance of that intention, acts to their detriment.

Detrimental reliance will be satisfied by both post-acquisition financial and domestic contributions[12]. Stack v Dowden[13] is the leading case in determining the apportionment of shares in property in the absence of express trusts. The most important aspect of the case was the fact that both parties kept their finances and bank accounts separate. The original ruling held that the property should be sold and the proceeds be divided equally, but the Court of Appeal allowed Ms. D’s appeal and ordered that the proceeds instead be split 65/35 in her favour.

The case was then appealed to the House of Lords, where Baroness Hale’s judgment in considering the situation by way of constructive trust, formed what is now the current law and precedent in beneficial interest disputes. Lord Neuberger gave the dissenting judgment, disputing not the outcome, but the methodology in reaching the outcome, preferring the approach that apportionment should be determined with a starting point of actual contributions to purchase price[14], thereby favouring resulting trusts over constructive trusts.

His Lordship did however emphasise that the resulting trust should only form the basis of a presumptive entitlement[15] and that it should not be conclusive, thus deviating from Lord Bridge’s stricter approach in Rosset. [16] The significance of the decision in Dowden is multifaceted with several key principles emerging. Firstly, where the beneficial interests are not declared, the presumption is that equity follows the law, with beneficial interests mirroring legal interests.

In sole ownership cases prior to Dowden, the law focused on the concept of a common intention constructive trust, dependent on the shared intention of the parties. Following Dowden however, sole legal ownership operates on the presumption that there is also 100% beneficial ownership. With joint ownership pre-Dowden, the law often analysed in terms of resulting trusts, dependent upon the law’s presumption as to the intention of the party who made the contribution. Now, the presumption is of a 50/50 split.

These assumptions however, are “readily displaced by any of a number of contra-indications that… equitable ownership was intended to take the form of a tenancy in common. ”[17] The rebuttal of the presumptive entitlements in joint ownership cases will be far more onerous than that of sole ownership cases with Baroness Hale declaring that such a rebuttal would be “very unusual. ”[18] Should the presumption be successfully rebutted, the court must ascertain the shares the parties’ intended.

To do so, Baroness Hale[19] dissected Chadwick LJ’s formulation[20], upholding the latter half, that it should be determined in light of the whole course of dealing between the parties, whilst rejecting the former half, that it should reflect what ‘the court considers fair’. Factors which may be used to determine the parties’ beneficial interests include the rejection of jus accrescendi[21], the nature of the parties’ relationship, the allocation of their respected finances and any discussions at the time of transfer which revealed their intentions[22].

The mere fact that the parties had contributed to the acquisition in unequal shares is not enough to rebut the presumption[23] thereby disparaging the use of resulting trusts in such determinations. The impact of Dowden’s principle that ‘beneficial ownership mirrors legal ownership’ is clearly illustrated in Fowler,[24] where the original trial judge viewed the starting point under a resulting trust basis (much like Lord Neuberger) and since Fowler had contributed nothing, she was awarded no share.

Under Dowden however, the Court of Appeal followed the starting point that in joint ownership, the presumption is 50/50 ownership bar any rebuttal. Fowler was subsequently awarded a 50% share. The judge concluded: “the legal technique that the court will use to ascertain whether both joint owners… had a beneficial interest is that of a common intention constructive trust test, rather than that of resulting trust. ”[25] The principle put forth in Dowden has since been upheld by several recent cases, most notably Jones v Kernott.

[26] The case clarified the position and effect of Dowden: beneficial ownership mirrors legal ownership, the presumption can be displaced and that their common intention is to be objectively deduced[27]. It also highlighted that the parties’ common intention forms at the time the property is acquired, but that such intention is susceptible to change, thus they can latterly form the common intention that their respective shares should indeed change (an ‘ambulatory’ constructive trust, per Lord Hoffman[28]). This view is consistent with the judgment of Chadwick LJ in James v Thomas. [29]